Archive for April, 2009

I once read that making a million dollars in the music biz is simple…spend 2 million.

That about sums it up these days – even for the major labels. But it wasn’t always that way. So what happened? There is no single answer, but the one you hear most often puts the blame on illegal downloads and piracy. OK, I agree that it contributes to the problem, but it is really the side effect of the root cause – which is that we have a lot more options nowadays than just music to spend our hard earned dollar on. This blog is gonna be a little longer than I am really comfortable with, but I think it’s important that we take a look back to see where we came from so we can get a bearing on how we got here.

Back in the day, music was a big part of the entertainment retail “pie”. If you wanted music, you walked or drove to a store like Sound Warehouse, Sam Goody, Peaches, etc, browsed the bins recalling what you have heard on the radio or video shows all week and you bought it. Major labels had the only songs on the radio (and for the most part still do) and they had the only product in the store so simple math shows that they were the only ones making money – and lots of it. The only competition the major labels had was themselves! It was an economic supply and demand nirvana.

Nowadays, however not only do we have music, we also have a zillion other things to entertain ourselves in the digital age which has caused the entertainment retail “pie” to be divided immensely. Video games, computers, camcorders, cell phones, you name it, it exists. You can download an MP3 (legally or otherwise), but you can’t download Grand Theft Auto (yet), so when a teenager has x amount of dollars, they can:

A) Legitimately purchase some music off of iTunes and wait until they save more dollars for the video game. We know how patient teens are right?

…or for the same money

B) Purchase the video game and illegally download the music off of Limewire for free. No teen would do this though right?

Well the result is that option B usually wins. Not fair? OK. Not right? OK. But it’s reality and its here to stay. The supply and demand nirvana that the major labels enjoyed – is gone. It’s done. Over. Like I said earlier it’s just a side effect because we have so many options today. And let’s not just blame the loss of revenue solely on peer to peer sites with illegal content to download, let me also point out that there is a plethora of HOTmusic and videos out there that are legitimate and FREE on online sites like YouTube and MySpace. So maybe buy the iPod and download some legitimate free music. What this means is that the major labels not only compete with themselves, but the entire world – and some of their competition is giving away music for free.

Record a hot song at home ($0), get your homies to video a hot dance ($0), upload to YouTube ($0), total value (priceless)!

Let’s dig a little deeper into these online sites and what makes them tick. Bear in mind that radio and the big music video channels used to be the only game in town and if you were not being played on them, then you were an unknown – a nobody. But YouTube and other online sites are becoming commonly accepted as the new TV because today’s technology has produced a generation of computer savvy users that like the control of seeing and hearing what they want – when they want it. They can entertain themselves online for hours where only radio or TV used to have that kind of captive capability. They find what they want, they download it to their iPod, they take it with them. This means that if you can generate a buzz online, you can be found by users – worldwide. In fact, I have personally seen artists that are YouTube Celebrities (should I trademark that LOL) that have better face recognition in markets than artists getting major spins on the radio in the same markets! So how much does it cost to be a YouTube Celebrity? Record a hot song at home ($0), get your homies to video a hot dance ($0), upload to YouTube ($0), total value (priceless)!

Yeah, we have many things that we can blame the current state of the music biz on, but what we need to do is get cracking on where we go from here. Check my next blog where I will present some of my thoughts on where we may be heading, but bear in mind that nobody can predict the future of the music biz and if somebody says they can – watch your wallet and run away cause in the words of the late great Biggie Smalls – they trying to stick you for ya paper.